Very and mobile drive accelerating growth at Shop Direct

Shop Direct, the UK’s second largest pureplay online retailer, which operates digital department stores Very.co.uk, Littlewoods.com, VeryExclusive.co.uk and LittlewoodsIreland.ie, today announces its full-year results for the 52 weeks to 1 July 2017.

Financial performance

Fifth consecutive year of record sales and underlying profits:

Group sales growth accelerated, increasing by 5.6% on a like-for-like basis1 to £1.93bn (+3.7% on an unadjusted basis), driven by sales growth of 14.6%1 to £1.26bn at Very (+12.6% on an unadjusted basis)

Underlying profit before tax (PBT)2 grew by 10.2%1 to £160.4m (+6.6% on an unadjusted basis)

Group gross margin was maintained at 40.8%, illustrating the strength of Shop Direct’s retail and financial services proposition – with favourable retail mix and improved bad debt rate – in a highly competitive and promotional market

Recruitment of new credit customers increased by 7.6%, with 14.1% growth at Very, thanks to better targeting

Exceptional items of £121m, including £112m in regulatory costs resulting from an increase in customer redress claims volumes across the market; this figure is estimated to cover all claims up to the deadline of August 2019

An encouraging first quarter of FY18 provides confidence for another year of record sales and underlying PBT

1 Like-for-like figures are on a 52-week to 52-week basis, and exclude benefits from the 53rd week in FY16

Making good things easily accessible to more people – a review of 2017

Game of phones: smartphone takes over half of all online sales for the first time

Mobile devices, including smartphones and tablets, were up 7ppts to 69% as a proportion of online sales

Sales via smartphone made up over half (53%) of online sales for the first time, up 10ppts compared with 2016

The MyVery app drove 32% of all Very’s mobile sales, up from 21% in 2016 – with bio-authentication added to the iOS app in July 2016 to allow customers to use their fingerprint to check out or manage their account, and the Android app introduced in August 2011

Winning the three-second audition: using big data and machine learning to stay relevant on a 4.7-inch screen

Shop Direct drove sales via smartphone by continuing to invest in mobile personalisation before, during and after customers shopped, including:

Working with Google and Facebook to identify users who look like Shop Direct’s most valuable customers, and serving these users relevant and timely ads and product recommendations

Applying machine learning to:

Identify customers who are exhibiting signs of lapsing, automatically contacting the customer with an incentive to shop

Predict when a customer will run out of a product they’ve previously purchased, automatically sending a handy reminder for the customer to stock up on the product; with strong results already generated across beauty products and scented candles

The home of great brands: more famous names that customers love

Jigsaw, Hackett, Victoria Beckham and Google Tech were among the famous labels added to Shop Direct’s roster of over 1,800 brands

Clothing and footwear grew by 6.4%1 (+3.9% on an unadjusted basis), driven by a 21.8%1 uplift in sportswear (+16.3% on an unadjusted basis) and a deepened product range across childrenswear and menswear

Continued to invest in the group’s unique credit offering

Completed the design and began testing of the group’s new financial services platform, with the three-year investment programme on track to culminate in 2018 – helping to personalise credit offers, develop new credit products and streamline the customer journey

Strengthened the executive team

Jon Rudoe joined from Sainsbury’s in the newly created role of group retail, technology and data director

Later this financial year, Shop Direct will launch the AI-powered, ‘natural language’ version of its customer service chatbot within the MyVery app

The AI-powered conversational user interface (CUI) can answer 32 different types of customer query, recognising over 4,000 written phrases and responding accurately

Shop Direct’s long-term vision is for Very Assistant to develop into a personal shopper for every customer

In 2018, the company will also apply AI to its credit decisioning capabilities, meaning faster, more personalised outcomes for customers, and better credit decisions and risk discipline for the business

Continuing digital transformation

Shop Direct is extending its use of agile methodologies, transforming how its colleagues work to crack customer challenges faster across every stage of the shopping journey

To support this, the group will change the way its workplaces are set up to encourage even greater collaboration. It started by opening its London hub in August 2017 to host up to 250 colleagues across data science, engineering, product and marketing, with the space providing a blueprint for the planned rollout across Shop Direct’s workplaces

Alex Baldock, group CEO at Shop Direct, said:

“We’re pleased to report our fifth successive year of record sales and underlying profits. Once again, Very and m-commerce were the big drivers of our growth.

“Our fashion performance stood out in a volatile market as we brought even more famous brands within reach of our customers. Spotting the athleisure trend early boosted sportswear and V by Very became an £150m brand in its first full year.

“Our long-term investments in digital, data, personalisation and Very are coming good. And our obsession with winning the ‘three-second audition’ on smartphones also continues to pay off. We’re delivering one of the most relevant shopping experiences on a 4.7-inch screen, with our five-star apps, digital marketing expertise and leadership in personalisation.

“Our customer already loves the upgrade she gets from our famous brands plus credit, but this business is still nowhere near its full potential. Using personalisation, we’re striving to be the easiest and most inspiring place to shop.

“Artificial intelligence is already driving results for us and we’ll soon launch one of UK retail’s first AI-powered chatbots for customer service. Longer term, we believe AI will bring scale to personalisation so digital retailers like us can be every bit as personal as stores. Very Assistant 2.0 will be another step closer to us democratising the personal shopper.

“We don’t expect the economic backdrop to get any easier, but we’ve started our new financial year in line with expectations and are confident of delivering another record year.”